January 28

In State of the Union, ideas to close income gap relevant for Mainers

Obama is likely to focus on the disparity, which is growing in Maine, but not as big as in other areas.

By Kevin Miller kmiller@pressherald.com
Staff Writer

and Eric Russell erussell@pressherald.com
Staff Writer

WASHINGTON — Jim Wellehan said he thinks often about the widening income gap in Maine and how, during his dad’s time, “you were embarrassed to be rich and ashamed to be poor.”

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President Barack Obama works at his desk in the Oval Office of the White House in Washington, Monday, Jan. 27, 2014, ahead of Tuesday night's State of the Union speech. (AP Photo/Jacquelyn Martin)

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“Everyone wanted to be middle class,” said the 75-year-old Wellehan, CEO of the Lamey Wellehan chain of shoe stores co-founded by his father a century ago. “It’s not that way anymore. I think there is more greed.”

Wellehan added: “When you stratify a society as much as we’re doing now, you lose that sense that everyone is in this together.”

Don Roberts, a former Augusta city councilor and a semiretired media professional, has a different take on the income disparity likely to be a central theme in President Obama’s State of the Union address Tuesday night. There will always be some income inequality in a capitalistic society, Roberts said, and he’s OK with that.

“I don’t think this class warfare is a good thing,” he said of the political debate over wealth and poverty. “To pound on the job creators, the people who spend all their time and all their risk capital in order to produce the engine for those who are less fortunate, I think that’s wrong.”

Those two perspectives are perhaps emblematic of the challenges facing Obama as he prepares to outline a 2014 policy agenda expected to be heavy on issues important to his Democratic base.

Democrats and Republicans will spend the next 9½ months jockeying for political advantage ahead of elections that could decide which party controls the Senate – and, by extension, the fate of the president’s major policy objectives during his final two years in office.

MAINE GAP GREW IN RECESSION

Obama has called the widening income gap “the defining challenge of our time.” Many wealthy Americans are seeing their earnings rise while lower- or middle-income workers log longer hours, often for smaller paychecks, at least when compared with inflation-adjusted earnings several decades ago.

While the White House has not released specific details of the State of the Union speech, officials indicated Obama is likely to reiterate his call for raising the minimum wage, expanding job training programs and increasing access to higher education among other top Democratic priorities.

The income gap in Maine has grown significantly over the past four decades but was exacerbated by the recent recession, which caused many Mainers’ wages to stagnate or shrink. Even so, the gap is consistently smaller in Maine than in other states.

In 2012, Maine had the 15th smallest earnings gap as calculated by a complicated but widely used mathematical formula for measuring income equality known as the “Gini ratio” or “Gini coefficient.” That’s a slight change from the 12th smallest gap two years earlier and the 11th smallest in 2008, according to the U.S. Census Bureau’s annual American Community Survey.

After adjusting for inflation, the median household income in Maine fell from $48,595 to $46,709 – a drop of 3.9 percent – between 2000 and 2012, according to census data. The percent of Mainers living under the federal poverty line, meanwhile, rose from 11.1 percent in 2002 to 14.7 percent in 2012.

DIFFERENT VIEWS ON SOLUTIONS

Economists and policy experts widely agree on the trend line and the reasons behind the growing gap. Maine’s population is graying and the state is transitioning from a manufacturing economy to one more dependent on tourism and seasonal service-sector jobs.

The experts do differ on the potential ways to close the gap, however.

“To the extent that Maine has followed the national trend, income inequality has been growing for almost 40 years now. And it accelerated under President (George W.) Bush and accelerated even more under President Obama,” said Jonathan Reisman, an associate professor of economics and public policy at the University of Maine at Machias.

Reisman, who leans conservative in his own politics, said a growing income gap is certainly a concern, but he questioned how much any president or governor can do to address it in the short term.

One policy change he believes would help is to expand the earned income tax credit – a refundable income tax credit for lower- and middle-income families and individuals. But he called raising the minimum wage “a job killer” at a time when jobs are already difficult to come by for many unemployed Mainers.

“Redistributing the wealth, which is pretty much what the (political) left wants to do, I don’t think that is going to solve the problem,” Reisman said. “We have had the ‘War on Poverty’ since 1964 ... and we certainly haven’t eradicated poverty yet.”

The Maine Center for Economic Policy, a liberal policy organization based in Augusta, said in its 2013 “State of Working Maine” report that worker productivity has increased 52 percent during the past 30 years while wages have grown only 28 percent after adjusting for inflation.

During that same rough time frame, the one-fifth of Mainers with the lowest incomes saw that income grow by 27 percent, while those in the upper one-fifth saw their incomes grow by 67 percent, according to the report.

“People are working longer hours to make up for the fact that wages have effectively stagnated at the middle and lower end of the income ladder,” said Garrett Martin, the group’s executive director. Additionally, Martin said it is getting harder for those on the lower steps to move up the ladder.

Americans should expect to hear Obama talk about that “upward mobility.” Speaking to reporters Monday, a senior White House official said Obama will discuss the need to “expand economic opportunities for the middle class to make sure every American ... has access to core elements of the American dream.”

Obama called for gradually increasing the minimum wage to more than $10 an hour in his State of the Union speech last year and is likely to repeat that call on Tuesday night, reflecting a recent Democratic push on the issue in Congress and in statehouses across the country, including in Augusta.

Martin’s organization supports increasing Maine’s minimum wage, which is $7.50 an hour. He also said one of the risks of tight economic times is that policymakers scale back investment in areas that help to grow the economy, such as on education and health care.

Heidi Brooks, a 43-year-old Lewiston resident, has been unable to work full time because of a disability, but is hoping to transition soon to meaningful employment. When looking at job prospects, Brooks said the biggest thing that stands out to her is that not many employers are willing to pay a living wage.

She said increasing the minimum wage would be a good first step, but she also thinks readjusting the tax structure is important.

“It’s not just the rates, it’s closing these loopholes that the wealthy can take advantage of,” Brooks said. “Meanwhile, others are choosing between heating their homes and eating.”

Maine’s unemployment rate stood at 6.4 percent in November, lower than the 7 percent national average and down from 7.2 percent in the state a year earlier. But the rate remains high in rural areas.

MANY ‘WORKING POOR’ IN MAINE

Ann Acheson, a research associate at the Margaret Chase Smith Policy Center at the University of Maine, said Maine has some characteristics that make it different from many other states. For instance, while Maine has traditionally had a lower-than-average poverty rate, it often has a higher number of “working poor,” she said.

“The recession has definitely increased the proportion of people in the state who are in the ‘working poor’ category, who are not in the poverty statistics but who are living just above the poverty line,” said Acheson.

Additionally, the “compression” of wages in recent years has a disproportionate impact on lower-income individuals, she said. They are more reliant on wages than those in the upper tier, who have benefited from several years of robust growth in their investments because of a bullish stock market, she said.

Wellehan said he earns about $100,000 a year and the lowest earners at Lamey Wellehan make about $27,000. He said he’s comfortable with that ratio because he believes he pays a living wage and treats employees well.

“Could I take more for myself? Sure, but I want the company to grow and be successful,” he said.

But Roberts, the semiretired media professional, said he’s discouraged when he sees people fall into the complaint that the rich are always getting richer.

“They give up and they stop working hard for themselves and they become dependent on government programs,” he said.

Kevin Miller can be contacted at 317-6256 or at:

kmiller@pressherald.com

Twitter: @KevinMillerDC

Eric Russell can be contacted at 791-6344 or at:

erussell@pressherald.com

Twitter: @PPHEricRussell

 

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Today's poll: State of the Union

Do you plan to watch President Obama's State of the Union address?

Yes

No

View Results